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The Norran Company needs 15,000 units of a certain part to use in its production cycle. If Norran buys the part from Waterloo Company instead of making it, Norran could not use the released facilities in another activity; thus, all of the fixed overhead applied will continue regardless of what decision is made. Accounting records provide the following data:

Cost to Norran to make the part:
Direct materials, $3
Direct labor, $12
Variable overhead, $13
Fixed overhead applied, $8
Cost to buy the part from the Waterloo Company, $27

In deciding whether to make or buy the part, Norran's total relevant costs to make the part are:

A. $360,000.
B. $240,000.
C. $420,000.
D. $405,000.

Accounting Basics, Accounting

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